The Reserve Bank of India (RBI) does not favour waiver of principal/interest of loans due to possible infectious effect and likely adverse impact on repayment culture and credit discipline. This has been accepted by the Bank in a letter, written just three days before the Union Budget for the year 2008-09 was presented, in which loan waiver to farmers was announced. The Rural Planning & Credit Department Central Office of the Bank has written this letter. The letter has been addressed to one Shri M.W. Onkar in response to his letter to the Bank. Shri Onkar, championing the cause of farmers, wrote a letter on December 25, 2007.
The letter says: ?Reserve Bank, as a matter of policy, does not favour across the board waiver of principal/interest of loans due to possible contagious effect and likely adverse impact on repayment culture and credit discipline.? The Bank further writes: ?However Reserve Bank of India has issued several standing guidelines on relief measures to be extended by banks. Some of them are? ?Guidelines for relief measures by banks in areas affected by natural calamities?, ? ?Package of relief measures for the debt stressed farmers of 25 districts in the states of Andhra Pradesh, Karnataka and Kerala?, ? ?Union Budget?2007-08?Proposal for continuation of 2 per cent interest subvention scheme for short-term crop loans in 2007-08?, ? ?Relief measures to assist distressed farmers?.?
Shri Chidambaram recently announced that Rs 10,000 crore will be spent from the current year'sbudget and the remaining 50,000 crore will be provided in next four years. He announced 16.66 per cent funds for the scheme. In the general election next year, it will be an uphill task for the UPA to return to power at the Centre again. Then the burden to arrange for the remaining funds for the scheme will have to be borne by the then government at the Centre. Even after the present package of Rs 60,000 crore to farmers as loan waiver, the farmers shall again be indebted and shall have to repay loan and demand loan again.